The Bank of Thailand on Wednesday raised its key interest rate by 25 basis points for a sixth consecutive meeting, citing the need to curb inflation risks as the economic recovery gathers strength against rising global uncertainties.
The central bank’s Monetary Policy Committee voted unanimously to raise the one-day repurchase rate to 2.00%. The rate has now been increased by a total of 150 basis points since August last year.
Of the 22 economists polled by Reuters, 17 had expected the committee to raise the rate a quarter point while the remaining five had forecast no change.
The central bank is expected to leave the rate unchanged for the remainder of this year, prioritising financial stability amid global uncertainties and a high rate of inflation, say analysts at ttb analytics, the research unit of TMBThanachart Bank.
Although the inflation rate has been steady, it remains at a high level and may increase slightly in the second half of the year as tourism continues to recover, ttb analytics said.
Inflation in April was 2.7% year-on-year, down from 2.8% in March and the lowest since December 2021.
Although headline inflation has eased every month since January and is within the central bank’s 1-3% target, policy makers have emphasised the need to keep price gains in check over time.
The key risks are increased consumption from a tourism-led pickup in economic activity and possibly higher spending by a new government following the May 14 election.
Wednesday’s rate move will help narrow the real interest rate to negative 0.67% from 0.92% previously — still making it Southeast Asia’s lowest after adjusting for prices.
The baht has weakened about 1.5% in the past month, while foreign investors turned net sellers of local bonds and stocks on concerns about possible delay in formation of a new government, which will affect budget spending and investment.
In a related development, the BoT said the country recorded a current account deficit of US$500 million in April, after a surplus of $4.8 billion in the previous month, the Bank of Thailand said on Wednesday.
Exports, a key driver of growth, contracted 4.9% year-on-year in April, the central bank said in a statement.
The Ministry of Commerce said this week that the customs-cleared dollar value of exports in the first four months of 2023 decreased by 5.2% year-on-year to $92 billion. Imports fell by 2.2% to $96.5 billion, resulting in a trade deficit of $4.51 billion.